COVID-19 has put unprecedented pressure on the hospitality industry. Hotel occupancy levels have fallen to historical lows globally as travel has stagnated. However, it is inevitable that travel will bounce back, bringing hotel occupancy along with it. The latest EY Future Consumer Index shows that people are hesitant to get back to traveling, whether for leisure or for business, in the same manner they did prior to the pandemic. We know that 49% believe it will take months for vacations to get back to the way they were before (20% believe it will take years), and 33% believe it will take months for the way they travel for work to return to normal.
There is no doubt that the travel and tourism industry was impacted significantly and severely in 2020, but the road to recovery must begin today. EY forecasts that the hospitality industry will recover close to 2019 levels by 2023.
Build Trust with Digital Guest Experiences
It is unquestionable that, in order for guests to return, hotel companies will have to dramatically rethink the guest experience at the property level. According to the EY Future Consumer Index, 64% of consumers say that, in the next one to two years, they’ll prioritize brands they’ve purchased from before. Only 20% of consumers feel they can fully place their trust in a specific brand. Earning consumer trust is going to be paramount for the hotel industry as it recovers.
Building trust in hotel brands will start with health and hygiene. In fact, 63% of consumers in a recent EY-Parthenon study indicated that cleanliness is their key criterion for hotel selection. Most hotel companies have begun to implement a new guest experience to address consumers’ need for health and hygiene. Valet parking, hotel check-in/out, dining, fitness, housekeeping and room amenities are all being rethought with these needs in mind. Processes are being developed to create contactless experiences, providing both guests and hotel employees with the satisfaction that each stay will be safe and secure. Some of these process changes will last even after the threat of COVID-19 dissipates.
A process change that is likely to survive is the increasing digitization of the hotel guest experience. Before COVID-19, hotel companies were investing in technology capabilities to enhance the guest experience. But now, technology has become critical for the contactless customer experience at a hotel.
Critical technologies include:
- Mobile check-in/out
- Mobile door unlock
- App-based, in-room dining
- Mobile device menus at restaurants
- Contactless payments at retail outlets
In addition to these capabilities, hotel companies will have to think through the adoption of COVID-19-specific technologies, such as thermal scanning, contact tracing for employees and UV filtration systems.
This new investment in tech solutions will allow hotel companies to innovate and reimagine the guest experience for the long term and simultaneously build loyalty. Greater adoption by customers will provide greater insight into usage and behavior patterns, which will enable hotel companies to further optimize and personalize the guest experience.
Reduce Costs, Diversify Revenue Streams
Investing in improved health and hygiene and supporting technologies will be costly and challenging in the current environment. Therefore, hotel companies will have to focus on optimizing costs. Hotels must reduce operating costs by eliminating services that are not revenue-enhancing and double down on services that create lasting brand experiences to drive loyalty and trust. Technology can be used to streamline operations costs and monitor and optimize distribution costs.
Diversification of revenue streams will also be key for recovery and will vary by hotel location and type. Urban hotels are thinking of converting rooms to short-term meeting spaces. The use of hotel rooms as office space is being considered, and student housing could be an option for hotels near college campuses. Longer-term rentals could be an interesting value proposition as well. Some of these ideas might outlast the pandemic and could be winning strategies that help hotels grow their top line over the long term. Implementation of these ideas will also require a robust technology platform that allows for flexibility in reservations and revenue management.
Whether it was Mexico’s recovery after H1N1 or Hong Kong’s recovery from SARS, this isn’t the first-time hospitality has been impacted by a health-driven crisis; each time, the industry has emerged stronger and healthier. Although COVID-19 is far more severe than the previous crises, there are still lessons to be learned. Responding rapidly to customer concerns, adapting operations to the new operating reality, and, most importantly, being transparent and engaging directly with customers are going to be key for the recovery.
The hotel companies that adapt successfully will reap both short- and long-term benefits as they use this crisis to build lasting and trusting relationships with guests that lead to brand enhancement and loyalty. These companies will also position themselves for continued growth in an increasingly competitive environment and develop resilience to future crises.
The views reflected in this article are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
 EY-Parthenon Life After Covid-19 Survey (N=1,537 | 4/14/2020), a US general population survey to better understand consumer behavior post-COVID-19 across sectors.